Will Novavax Stock Jump Another 25% This Year?

Novavax (NVAX -0.95%) ranked as the best-performing COVID-19 vaccine stock in 2020. It's off to a fantastic start in 2021 as well with a triple-digit-percentage gain. In this Motley Fool Live video recorded on Feb. 3, Fool.com contributors Keith Speights and Brian Orelli discuss whether or not Novavax stock can tack on another 25% this year.

Keith Speights: Alright. Let's move on. There was another big story from last week. It came from Novavax, the ticker there is NVAX. Novavax reported 89.3% overall efficacy for its COVID vaccine and these were from results from a late-stage study conducted in the United Kingdom. But the company said that the efficacy against the original coronavirus strain was 95.6%, which is even higher than Pfizer's and Moderna's results.

Earlier this week, an analyst, Wall Street analyst, B. Riley Securities analyst, Mayank Mamtani, I'm probably mispronouncing his name there, but he boosted his price target on Novavax from $223 per share to $334 per share, really big boost to that price target. It's around 25 percent higher than Novavax's current share price, or at least than it was then. Brian, do you think that target is too optimistic or pessimistic?

Brian Orelli: I mean, I think it probably depends on the timeframe. But if you look at the market caps, Novavax's market cap is $18 billion, BioNTech is $27, $28 billion and Moderna is $62, $63 billion. I think there's room to get closer to its peers. I think its peers probably have more in their pipelines than Novavax has, and Novavax does have a flu vaccine that has already proven successful and they're just waiting to submit it to the FDA.

But beyond that, I think their pipelines were not as packed as BioNTech and Moderna, and I think BioNTech and Moderna with their mRNA technology, can develop new vaccines fairly quickly as we saw with the coronavirus. I think that it's probably a good valuation right now. I'm a shareholder and I bought before the phase 3 data, so I'm a happy shareholder. But 25% higher is still going to be below the market caps of its peers. Again, I think it comes back to is, how long does immunity last? If Novavax is selling coronavirus vaccine in three or four years, then it's probably low valuation right now and if they're not, then it's probably a reasonable to high valuation.

Speights: I agree. Novavax does have more catalysts on the way. Like I said, these were results from a U.K. study, though it looks likely that they will receive authorization in the United Kingdom and that could lead to authorizations in Europe as well. They will have results from their study, like [inaudible] such study that's being conducted in the U.S. and Mexico in just a few months, so it's not very far off. If those results are similar to the U.K. results, which you would expect they probably would be, then Novavax should be on target to also pick up Emergency Use Authorization in the U.S.

All of those are catalysts that could just keep Novavax in the headlines, and keeps investors psyched about the stock. So I think there's definitely some near-term catalyst for this stock and over the long run, I think what you said is exactly right, Brian. I think it depends on duration of protection, some other market dynamics, what other vaccines come out and how effective they are.

Of course, Novavax has NanoFlu, the flu vaccine candidate, and they are even looking at exploring the potential to combine the COVID and flu vaccine candidates into a combination vaccine. If that works out, that will be for post-pandemic use. If we see coronavirus, COVID-19 become like the seasonal flu, something that you have to have annual shots, that could give Novavax an edge going forward. I think Wall Street analysts, you have to take their targets and recommendations with a grain of salt, but I think in this case, it's probably not a bad target at all.

Orelli: Yeah. I think in this case it's probably more of a guess than sense. It's really hard to value these companies because you just don't know what the sales are going to be in a couple of years and how can you value that. All companies are going to be valued based on their future revenue and earnings, and so, if you can't accurately estimate those limits, it's just a guess at this point.

Speights: It's important for investors to realize just how much guesswork goes on with biotech stocks because you never know what's going to happen -- even very promising candidates in late-stage testing often flop. You just don't know what's going to happen.